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AIG Bailout Backfires

Bailouts seem to be the new trend in this recession. Companies, such as AIG (American Insurance Group) have received a helping hand just as they were on the brink of failure. President Barack Obama has been confident that these bailouts are the best course of action—that they will benefit the economy, rather than damage it even further. But what should companies be allowed to use this bailout money for?

AIG has recently paid $165 million dollars in bonuses to the very people in its company that led them to failure in the first place. AIG claims that legally they had to pay these bonuses because of predetermined contracts.

Legal contracts or not, people are not seeing the justification in this move, especially after the Federal government aided AIG with over $170 billion dollars in taxpayers money. In a time when people are losing their homes, their jobs, and their investments, taxpayers need money the most, and they need to know that their money is going to a place that’s going to benefit them.

Obama has promptly stepped said that he will do everything legally possible to block these bonus payouts. “It’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers …?” Obama also stated that this block is warranted, because of AIG’s recklessness and greed.

Action has quickly been taken, and only a day after Obama’s announcement, U.S. Treasury Secretary Timothy Geithner issued a statement that AIG must compensate taxpayers for the $165 million they spent on bonuses.

Obama and his economists have stood firmly behind their stimulus plan, even though many outside experts, such as the 350 economists that signed the Cato Institute petition, have been against the increased spending. But now that AIG has recklessly used their bailout money, will the government continue to distribute bailouts? Will they implement restrictions on what the bailout money can be used for?

Whether or not more bailouts are distributed, AIG has certainly set an example.

By Jeanette Bliemel
jbliemel at

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